Break-Even Calculator
Find the break-even volume and revenue from fixed costs, variable cost, and selling price.
Calculator
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Contribution margin: ₹200.00/unit
Break-even quantity: 2,500 units
Break-even revenue: ₹8,75,000
Formula
Break-even quantity = Fixed costs / (Selling price − Variable cost per unit). Break-even revenue = Break-even quantity × Selling price. Contribution margin = Selling price − Variable cost.
Example calculation
Fixed costs ₹5,00,000/month, variable cost ₹150/unit, selling price ₹350/unit. Contribution = ₹200/unit. Break-even = 5,00,000/200 = 2,500 units/month.
Engineering notes
Break-even analysis assumes linear cost and revenue relationships. In practice, volume discounts, stepped fixed costs, and capacity constraints create non-linearity. Use as a planning guide, not a precise forecast.
When to use this calculator
- New product launch — determine minimum sales volume needed before committing to production investment
- Pricing decisions — test how changing price affects break-even volume and profitability
- Cost reduction targets — quantify how much fixed or variable cost must fall to break even at current volume
- Plant investment — evaluate whether a new machine or facility investment is financially viable
- Sales target setting — translate financial break-even into a unit sales target for the sales team
Frequently asked questions
- What is contribution margin and why does it matter?
- Contribution margin (CM) = Selling price − Variable cost per unit. It is the amount each unit sold contributes toward covering fixed costs and then generating profit. CM ratio = CM / Selling price. A high CM ratio means each rupee of revenue covers a large portion of fixed costs, so break-even is reached at lower revenue. Products with higher CM ratios are more profitable at the margin.
- How does break-even analysis change with multiple products?
- For a multi-product business, use the weighted average contribution margin: Weighted CM = Σ (CM per product × sales mix %). Break-even units = Fixed costs / Weighted CM. The result gives total units; multiply by each product's share to get individual break-even quantities. Note that any change in sales mix changes the break-even point.
- What is the margin of safety?
- Margin of safety = Actual sales − Break-even sales (in units or revenue). It shows how far sales can fall before you start making a loss. Margin of safety % = (Actual − Break-even) / Actual × 100. A margin of safety above 20–25% is generally considered comfortable for manufacturing businesses.
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